Highlights:

  • CPI inflation ticked up to 2.4% in October from 2.2% in September.
  • A 4.6% m/m increases in airfares — likely reflecting more methodology/sample changes earlier this year more than underlying price trends — accounted for part of the headline gain
  • The Bank of Canada’s three preferred ‘core’ measures (the trim, median, and common CPI) ticked up on average to 2.0% from 1.9% in September. They have been close to 2% for most of the year.

Our Take:

Volatility in the airfares component was part of the story once again in October with a 4.6% month-over-month increase. That followed a 16.6% drop the prior month that in turn retraced a similar-sized jump in July. We continue to suspect that those unusual swings can be traced back to new methodology/sample implemented for the component earlier this year more than any fundamental change in underlying price growth. Energy prices were still up 7.9% from a year ago despite a monthly decline in gasoline prices, food price growth ticked up to 2.0% from 1.8% in September, and higher interest rates pushed mortgage interest costs up 7.0% from a year ago.

– advertisement –


Looking through monthly volatility, there was little to point to in terms of changes in underlying inflation trends. The Bank of Canada’s three preferred ‘core’ measures (the trim, median, and common CPI) ticked up on average to 2.0% from 1.9% in September.

Year-over-year energy price growth is clearly likely to soften going forward given the pullback in oil prices in recent weeks — and that pullback has in turn generated concern about another round of retrenchment in the oil sector. Household spending has also shown clear signs of slowing — even with a decent 0.5% increase in retail spending volumes in September also reported this morning. Slower growth is also to be expected with the economy bumping up against capacity limits, though. Barring an unexpected shock — and at this point we expect the pull-back in oil prices to-date will ultimately have a negative but manageable impact — there is still room for the Bank of Canada to follow through with further gradual interest rate hikes next year.